Pennsylvania taxpayers on hook for stashed-away debt

HARRISBURG — Pennsylvania has about $12 billion in outstanding debt, good enough for a No. 15 overall ranking in State Budget Solution’s Fourth Annual State Debt Report.

That accounts for primary government debt, but there’s even more debt lurking elsewhere.

Taxpayers eventually will be responsible for more than $36 billion in “off-budget” debt that’s stashed away on the books of agencies and authorities such as the Pennsylvania Turnpike Commission, Pennsylvania Higher Education Assistance Agency and the Commonwealth Financing Authority, among several others.

“The situation may be even worse, and I think this reflects the troubling difficulty of accessing and interpreting state financial information,” said Cory Eucalitto, an editor and author at State Budget Solutions, a Virginia-based nonpartisan policy organization that studied debt loads across all 50 states.

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For example, the Pennsylvania Turnpike Commission led the 13 authorities and agencies with about $8.2 billion in debt, according to the current state budget book.

The Pennsylvania Higher Educational Facilities Authority owes about $6.8 billion, the Pennsylvania Higher Education Assistance Agency about $6.6 billion and the Pennsylvania Economic Development Financing Authority about $4.2 billion, according to state figures.

Back on the state’s books, Pennsylvania places its outstanding debt at about $11.7 billion, slightly lower than the study’s numbers. The state has a debt limit of $62.4 billion this budget year.

Pennsylvania, which anticipates paying about $1.2 billion this fiscal year for general obligation bond debt, hardly is alone when it comes to owing money.

This year’s State Budget Solutions study found the country’s state governments combined are a staggering $5.1 trillion in debt — $16,178 for every person residing in the United States. Driven by a massive unfunded public-pension liability, California topped the list, while South Dakota carries the least total debt, the study found.

Pennsylvania finished in the middle of the pack in categories such as state debt as a percentage of its gross state product (tied at 24th) and state debt as a percentage of total fiscal year 2012 expenditures (22nd).

The Keystone State finished 24th when considering state debt per capita — each Pennsylvanian’s share is $14,487, according to State Budget Solutions. Sparsely populated Alaska has the highest debt per capita at $40,714 while Arizona had the least at $9,321.

Jay Pagni, a spokesman for Gov. Tom Corbett, said the state has been fiscally prudent when it comes to debt. In one example, Pennsylvania saved millions of dollars by refinancing $3 billion in unemployment debt it owed to the federal government in 2012.

“We have been judicious, especially under this administration,” said Steven Heuer, director of revenue, capital and debt in the Governor’s Budget Office. “We’re always looking to save money, somehow, some way.”

The debt details can bet a bit murky when considering Pennsylvania’s unfunded public-pension liability because the study and the state use different formulas to measure the obligations. It’s likely be a hot topic in the state Legislature this year.

Pennsylvania places the obligation at about $47 billion, while the study sets the figure at $156.6 billion.

The differences lie partly in the anticipated rate of return, with Pennsylvania using a higher, 7.5 percent rate on its Public School and State Employees plan. The study used a lower, less risky rate that Eucalitto contended is more accurate, given the state’s “heavily protected” pension obligations.

While settling on different figure, the state didn’t challenge the study’s way of measuring the pension liabilities.

“There’s nothing wrong with the formula, it’s just a different method and a different discount factor,” Heuer said.

In reality, the figure probably falls somewhere in between the two statistics, said Nathan Benefield, director of policy analysis for the Commonwealth Foundation, a Harrisburg-based free-market think tank.

And while state debt is not a glamorous issue or the type of topic that has voters bombarding lawmakers for change, it is one that can have a ripple effect on bond ratings or spending on education and transportation needs, Benefield said.

“It’s going to come back in a couple ways,” Benefield said. “Either you’re going to have higher taxes to pay for the debt — the cost of borrowing — or you’re to see cuts in other kids of more popular programs.”

Andrew Staub is a reporter for PA Independent and can be reached at Andrew@PAIndependent.com. Follow @PAIndependent on Twitter for more.